Malaysia offers lower cost of doing business

Malaysian customs director-general Subromaniam Tholasy.

PHOTO: The Star/Asia News Network

Companies providing services for clients outside Malaysia will see a lower cost of doing business from the government's latest measure to further refine the goods and services tax (GST).

For instance, those providing oil bunkering services or retooling work for foreign clients will not have to impose a GST charge of 6 per cent.

Previously, local services providers would have charged the GST of 6 per cent to their overseas customers, who normally would have claimed it back from the Malaysian government.

"Now, local companies providing services for export need not charge the GST. It will make them more competitive and ease the cash flow of clients," said Customs director-general Datuk Subromaniam Tholasy.

Among the local companies that would benefit from the move is Dialog Group Bhd, which provides oil tank storage services to international companies.

Previously, the grouse was that the foreign companies needed to register with the Customs Department to reclaim the GST.

"Now, there is no necessity," said Subromaniam.

Another segment of companies that would benefit are those who do re-tooling work on machineries, an area that is generally the domain of small and medium enterprises.

These companies no longer need to charge GST on their foreign clients for the retooling works.

The latest measure to refine the GST came about after an appeal by companies providing bunkering and oil tank storage services to foreign entities.

Prime Minister Najib Tun Razak announced through his blog posting on Tuesday that four additional services would be treated as zero-rated supply under the GST effective from July 1.

The first involved prescribed services performed in connection with goods for export, where the service is supplied to overseas customers.

The second would be prescribed services supplied in the Free Zones, including Licenced Manufacturing Warehouses, to overseas customers.

The other two services are research and development (R&D) services provided for overseas customers and non-recurring expenditures incurred as engineering expenses, including tools and machinery used in the manufacturing process of goods.

Pricewate-houseCoopers Taxation Services Sdn Bhd executive director Raja Kumaran applauded the move as a fair initiative that could help alleviate the rising cost pressure faced by many companies.

"Many companies in Malaysia are involved in providing value-added services for overseas companies, and some foreign entities have chosen this country as the centre of their R&D. So, the latest measure is a great relief to many corporations and helps ease the way of doing business in the country," he told StarBiz.

On a similar tone, KPMG Tax Services said the new initiative could help propel local industries in line with the national and strategic importance placed on exports.

"Given the current challenging environment, coupled with the increasing cost of doing business, the introduction of such relief would not have come at a better time, and we suspect that the qualified businesses would indeed commend such a move by the Malaysian government," KPMG executive director, indirect tax practice, Ng Sue Lynn, said.

She pointed out that the recent relief granted under Section 56(3)(b) of the GST Act 2014 would be beneficial for the following companies/industries; transport/logistics, manufacturing, oil and gas and R&D.